STARTING YOUR OWN BUSINESS

The best online payment apps for small businesses

6 min read
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As of 2018, 87% of all purchases in the UK were made online. That number has only increased, with more and more customers preferring online payments.

If you’re starting your own business in the UK, then, you’ll need to be able to take online payments. In this article, we take you through the basics and summarise some of the different options available.

How to take payments online

There are a few different ways to handle online payments.

  • Bank transfers are simple and understandable, but can seem unprofessional.

  • Direct debits allow customers to set up recurring payments, such as subscriptions and repeating invoices.. They’re not designed for one-off payments, but work well if you’re collecting repeat payments.

  • Mobile payments allow customers to pay using their mobile, either on a website or at a point of sale.

  • Point-of-sale (POS) payments are payments taken at your physical location or online counter.

  • Online card payments are the most popular way for businesses to take online payments, and they’re what we’ll be focusing on here.

Card payments are handled through online payment systems and can be made using a debit or credit card or directly from a customer’s bank account.

We’ll look at how to set up a payment system below, but you should know from the outset that however you do this, you can adopt a payment structure that suits your business, from fixed monthly fees to pay-as-you-go models.

Typical fees are:

  • set-up: £20–£50 

  • transactions: 10p–30p per transaction 

  • percentage of monthly sales: 1.9%–4.0%

How do online payment systems work?

An online payment system is usually made up of three elements:

  • a payment gateway, which sends payments to the processor 

  • a payment processor, which handles the actual transaction 

  • a merchant bank, into which the customer’s funds are deposited before they are transferred to your business bank account

All-in-one payment systems provide all these elements in a single package, and almost all systems make integration quick and painless.

Benefits of online payments

Online payment systems make selling quick and easy, and provide good security on both ends.

Payment card industry regulations require all online payments to be SSL (secure socket layer) encrypted. Most systems will have their own SSL certificate, while website builders like Squarespace or Wix make it easy for you to get your site SSL certified.

Mobile payment systems

As smartphone security improves, more and more people are using their mobile devices for payments. Adopting these systems for your business can make dealing with customers easier and quicker than ever.

Types of mobile payment include:

  • QR code payments - customers have to scan a QR code to open a payment window

  • mobile-to-mobile payments - allow for quick and secure payments using a mobile number but are less common for a business

  • magnetic secure transmission (MST) and near-field communication (NFC) payments - these require a physical device

Each of these is useful for in-person transactions, but mobile payments are also available online. Many online payment apps allow customers to use their mobile to complete their purchase, and most browsers allow mobile users to enter their card details as they would on a desktop.

How to set up an online payment system

When it comes to setting up an online payment system, businesses have several options.

Opening a merchant bank account

A merchant bank acts as a go-between, taking care of things like authentication.

Businesses choose the card companies they’ll work with and set up an account. When customers pay, they send money to the merchant bank, which then releases it into the business’s account.

The major advantage of this method is that it works out cheaper in the long term, as the merchant bank’s monthly and transaction fees are generally lower than those involved in other options.

However, merchant banks also require you to sign a multi-year contract, and the process can be time-consuming.

Using an e-commerce platform

Platforms like eBay and Etsy have built-in payment processors. While you’re unlikely to see many big businesses using these sites, they can be perfect for small shops or self-employed sole traders.

Using an online payment app

This is perhaps the best option for small businesses, as it lets you get set up and start accepting payments quickly and easily. 

While transaction fees are high, using online payment apps can actually be cheaper for new businesses than setting up a merchant bank account.

In many cases, it’s best to start with a payment app and shift to a merchant bank account later on, when you’re more established.

General tips

If you need help deciding which payment system is best for you, consider the following questions:

  • Does this payment app suit my business model (e.g. ecommerce or subscription)?

  • Will my customers recognise this payment system?

  • Does this app offer the payment options that my customers expect?

  • Is this payment system affordable for my size of business?

  • Do I expect to be taking international payments?

  • Can this payment system connect directly to QuickBooks?

Startups.co.uk and Merchant Savvy offer helpful comparisons of secure payment systems that might be suitable for your small business.

With so many things for small businesses to keep up with, find out how QuickBooks can help you run your finances.

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Online payment apps that integrate with QuickBooks

Consider these online payment apps for your business - all of them can integrate with QuickBooks.

PayPal - best for international payments

Pros:

  • available worldwide: doesn’t confine your business by location

  • one of the most trusted online payment apps

  • offers discounts on ecommerce platforms

  • offers business solutions including the PayPal Business Debit Mastercard and PayPal Here Card Reader

  • a PayPal account is optional for your customers

Cons:

  • doesn’t have a shopping cart functionality

  • relatively expensive fees on PayPal Wallet and American Express payments

QuickBooks customers benefit from a special low rate on debit and credit card transactions with Paypal.

GoCardless - best for recurring payments

Pros:

  • offers a very low fee of 1% + 20p per transaction, capped to a maximum of £4 on domestic payments. 

  • uses Direct Debit to automatically collect recurring payments such as subscriptions, instalments and invoicing every time they’re due.

  • a flexible option for businesses with recurring payments - also allows for changes in price. 

  • customers provide details and authorise future payments just once.

  • integrated into QuickBooks Online, saving hours of admin time.

Cons:

  • Payments usually take a few days longer than cards to process so less well suited to one-off purchases.

  • Only available in the UK, Ireland, USA, Canada, Australia, New Zealand, Denmark, Sweden and the Eurozone

The QuickBooks GoCardless partnership is ideal for small businesses that bill their customers on a recurring basis.

Zettle - best for point of sale payments

Pros:

  • No monthly fee or lock-in contracts 

  • Accepts almost any payment method, including Amex, contactless and smartphones

  • Fast set up means you can start selling straight away 

  • Zettle Reader charges quickly for all-day battery life 

  • Super-fast transaction speed processes a payment in seconds

Cons:

  • Bank deposits take two business days 

  • 1.75% transaction fee may be expensive on high ticket items 

QuickBooks customers save £40 on a Zettle card reader.

Shopify - best for e-commerce websites

Pros:

  • offers everything you need to start selling online, including web hosting, a shopping cart, payment processing, a blog and an SSL certificate

  • offers customisable themes for your online shop

  • you don’t need a credit card to join

Cons:

  • gets more expensive if you want to use an external gateway

Amazon Pay - best for ease of use

Pros:

  • quick and frictionless checkouts

  • customer details are verified with Amazon

  • enables you to complete transactions on your own site

  • no hidden costs, lock-in or monthly fees

Cons: 

  • can be expensive for smaller businesses

How long do online payments take to process?

Although the specifics may vary, merchants usually receive a payment anywhere from 24 hours to three days after customers send it. This means that online payments aren’t just quick for customers, but can usually get the money into your business’s account more quickly than if you were depositing cheques or cash.

What’s next for your business?

We hope you’ve found this guide to online payments useful. If you need more help in the process of starting your own business, our latest questionnaire can provide you with a personalised to do list to ensure you don’t miss out on any crucial steps. Complete the questions honestly to see exactly where you’re at.

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